Keeping it Healthy in Today's Tough Economy Managing and Investing Your Reserve Fund

 In today’s harsh economic times, maintaining a healthy reserve fund is more important  than ever. A co-op or condo’s reserve fund can be used to cover any number of emergency expenses from sudden  repairs to legal costs. In addition, a reserve fund can be used for ongoing  maintenance projects or for anticipated future repairs.  

 How Much is Enough?

 Though a robust reserve fund is a necessity, there is too much variation in  co-op and condo buildings to have one specific formula to calculate how much  money should be in a building’s reserves—at least not one that works across the board. That said, there are some rules of  thumb and guidelines that boards can use to determine a healthy amount to keep  in reserve.  

 One way to get a sense of what your co-op or condo should have in reserve is to  look ahead at the building’s needs. Conduct a reserve study or a survey to determine what systems might  need to be replaced and what repairs might be necessary over the next five  years.  

 “Boards should do a study—formal or informal—of all the systems in their building,” says Michael Esposito, an audit partner with Kleiman & Weinshank, LLP, an accounting firm based in Manhattan. “A board, super or engineer can do this to get a sense of what needs to be  replaced in a five-year period, and what that cost will be,”  

 “The only way you could really calculate requirements are to conduct an  engineering study,” says Gary Kokalari, a former president and treasurer of his own co-op and a  specialist in co-op finance with Merrill Lynch in Manhattan. “A qualified consulting engineer should look at building’s useful systems and make a determination of what funds would be needed going  forward.”  

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